State and feds fail to protect Americans from foreign scammers

Financial scams are a plague on society so widespread that they have become a kitchen table issue. Americans self-reported $12.5 billion in scam losses in 2024, an amount that is almost certainly underreported, considering more than seven in 10 Americans report being targeted by scammers. The problem is so prolific that a recent survey shows Americans fear financial scams more than nearly any other crime.

According to the FBI’s Internet Crime Complaint Center, more complaints are filed in California than any other state. One particularly awful story comes from an 81-year-old Alhambra widower who lost $720,000 to a cryptocurrency scam, her entire life savings. Like so many others, she has little recourse and almost no government coordination to assist her.

The federal government has long failed to protect citizens from this growing threat, leaving states to pick up the slack. But the problem is extremely complex. These scams typically originate overseas, within vast criminal networks and robust scam centers, leaving states without jurisdiction to punish scammers or recoup funds. This has led some states, including California, to attempt a burdensome regulatory approach that would punish financial institutions for allowing funds to leave accounts.

One such proposal was California’s Senate Bill 278, which would have allowed delays in transfers of more than $5,000 from leaving accounts held by seniors. The bill was vetoed by Gov. Newsom in 2024 due to financial freedom concerns. And while the governor’s rationale was correct, he missed the bigger point. This whack-a-mole approach to addressing scams would have introduced unnecessary regulations on financial institutions — which are merely the final target in the elaborate multistep scheme of the scam life cycle — while failing to address root causes.

Understanding the scam life cycle is essential to crafting durable policy. Before a victim falls prey to a scam, they are often duped in a quick, emotional, panic-inducing way. Other times, they are scammed over a long period, and sometimes the scammer forms a relationship with the victim, typically resulting in larger losses.

Recently, a “reformed scammer” from Nigeria admitted to scamming Bay Area residents out of $70,000. He impersonated government agencies like the IRS, and admitted to romancing lonely victims. But before he received the money, various players were involved, including telecommunications companies that unwittingly deliver spam calls, and texts and social media companies that unknowingly host fake ads. Other times, scammers insist victims use cash to purchase gift cards or deposit into crypto ATMs — an issue that California’s regulatory proposals would not solve.

It therefore does not help to target financial institutions since they play a small role in the broader scam life cycle. Policymakers and private industry must detect scams at the outset, deter scammers from operating, and protect vulnerable populations. This is not to say financial institutions have no duty to protect consumers. In fact, they are more incentivized to fight scams than nearly anyone else, and do so in many voluntary ways.

But other businesses should protect people from scammers, too. That could include regulatory intervention, like stricter laws on caller ID impersonation or increased social media advertiser verification, which would limit a scammer’s ability to ever contact victims. But as technology evolves, including technologies used by scammers, regulatory approaches will remain multiple steps behind.

This means the federal government must target the real root of the problem — the overseas scam centers themselves. Fortunately, action is ramping up in various ways, including through the new Federal Scam Center Strike Force housed in the U.S. Department of Justice. This center can target overseas scam centers directly.

Additionally, both the Treasury and State Departments are now placing sanctions on several Southeast Asian scam centers for stealing billions of dollars from Americans. Combined, these actions showcase efforts to stop scams, and highlight the possibility of recouping losses Americans have incurred by blocking and seizing assets.

All of these efforts are relatively new, and time will tell how effective they are. But this show of federal force is a step in the right direction.

Meanwhile, states can aid people through education and awareness, and can help them understand how to report scams. Scam reporting is currently fragmented and confusing, leaving victims feeling helpless. Americans need a central hub for reporting, resolution and possible restitution, which will require further federal efforts. But in the meantime, increased funding of state and local police departments to train officers to aid scam victims can help.

The fact that money is being deceptively extracted from Americans and funneled to foreign governments and crime rings, harming economic security, stoking fear and empowering bad foreign actors, is a national emergency. While other Western nations implement national strategies, the United States lags behind, and states, as California’s experience shows, can only do so much. Americans must demand more from both Washington and the private sector.